Correlation Between Riverview Bancorp and Financial Institutions

Can any of the company-specific risk be diversified away by investing in both Riverview Bancorp and Financial Institutions at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Riverview Bancorp and Financial Institutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Riverview Bancorp and Financial Institutions, you can compare the effects of market volatilities on Riverview Bancorp and Financial Institutions and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Riverview Bancorp with a short position of Financial Institutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Riverview Bancorp and Financial Institutions.

Diversification Opportunities for Riverview Bancorp and Financial Institutions

-0.23

Correlation Coefficient

Riverview Bancorp  Financial Institutions

Very good diversification

The 3 months correlation between Riverview and Financial is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Riverview Bancorp and Financial Institutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Institutions and Riverview Bancorp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Riverview Bancorp are associated (or correlated) with Financial Institutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Institutions has no effect on the direction of Riverview Bancorp i.e., Riverview Bancorp and Financial Institutions go up and down completely randomly.

Pair Corralation between Riverview Bancorp and Financial Institutions

Given the investment horizon of 90 days Riverview Bancorp is expected to under-perform the Financial Institutions. But the stock apears to be less risky and, when comparing its historical volatility, Riverview Bancorp is 1.52 times less risky than Financial Institutions. The stock trades about -0.11 of its potential returns per unit of risk. The Financial Institutions is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,688  in Financial Institutions on November 29, 2024 and sell it today you would earn a total of  95.00  from holding Financial Institutions or generate 3.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Riverview Bancorp  vs.  Financial Institutions

Riverview Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Riverview Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Financial Institutions

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Institutions are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Financial Institutions is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Riverview Bancorp and Financial Institutions

The main advantage of trading using opposite Riverview Bancorp and Financial Institutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Riverview Bancorp position performs unexpectedly, Financial Institutions can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Financial Institutions will offset losses from the drop in Financial Institutions' long position.

The idea behind Riverview Bancorp and Financial Institutions pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Insider Screener module to find insiders across different sectors to evaluate their impact on performance.